The burgeoning economy of Vietnam is maturing its way into a new phase. The Asian nation of 97.3 million has taken its place among the linchpins of high-tech supply chains, taking in raw materials and churning out mobile phones, tablets, and other computer gear for over a billion middle-class consumers all over the world.
In addition, Vietnam is becoming a key part of the alliance of Asian trading powers setting up a counterpoint to the economic poles of the U.S. and European Union, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics, which has been building up its Vietnam database.
Overall Vietnamese exports in the first quarter of 2022 increased 13.6% year-on-year to $89.1 billion. Much of that growth is being driven by Chinese and U.S. manufacturing companies. Of those exports, $65.4 billion, or 73%, came from foreign direct investment.
Overall, Vietnam’s gross domestic product is expected to rise 5.5% in 2022, up from 2.6% in 2021, according to the World Bank. Part of the increase in exports is due to a rebound from the Covid-19 pandemic, but Vietnam is also booming its production of consumer goods. The exporting manufacturing sector in 2022 will benefit “from steady demand from the United States, the European Union, and China,” the World Bank wrote in a recent report.
Vietnam’s main partner as manufacturers draw up new global supply chains is China. Imports from China increased 12.6% to $27.4 billion, dwarfing figures from other countries. Meanwhile, exports to China rose 7% to $13.4 billion.
As it imports large quantities of parts and raw materials from China, Vietnam is still beefing up exports to Western markets. Exports to the European Union increased 18.3% to $11.6 billion. Shipments to the U.S., its top export market, rose 16.7% to $26 billion.
The bad news for exporters in the West is that Vietnam, like China, is shrinking its purchases from the U.S. and EU. Imports from the EU declined 3.2% to $4 billion, and shipments from the U.S. fell 7.8% to $3.4 billion. Those are tiny numbers compared to shipments from China. Overall imports rose 15.8% in the first quarter of 2022 to $87.6 billion.
Vietnam’s integral role in high-tech supply chains is visible in its imports. Imports of “computers, electrical products, spare-parts and components thereof” increased 31.1% to $21.7 billion. Imports of “machine, equipment, tools and instruments”, however, fell 2.9% to $10.5 billion. Vietnam’s manufacturing prowess means it is more self-sufficient than most countries. That’s one of the reasons imports of textiles, for example, shrank 6.4% to $1.6 billion.
However, it needs large quantities of raw materials. Imports of crude oil rose 2.6% by quantity to 1.9 million tons. By value, they increased 49.8% to $1.2 billion. Imports of chemicals rose 34.2% to $2.3 billion.
Vietnam’s total trade, remarkably, is twice that of GDP. Its trade with regional partners is expected to expand further thanks to the new Regional Comprehensive Economic Partnership. The RCEP, which will cut tariffs and ease trade among countries that already trade with each other, includes Vietnam, China, Japan, South Korea, Australia and New Zealand. Vietnam has been the prime beneficiary of China’s changing trade relationships with the U.S. and Europe, rising protectionism in the West, supply chain adjustments, and the boom in economies across Asia. The combination of low labor costs, stable exchange rates and prodigious foreign investment from multinational companies have turned Vietnam into a shining star.
To be sure, Vietnam’s agribusiness, the anchor of its export economy before industrial development, is still prosperous, and evolving. Its exports of fishery products rose 45.4% to $2.5 billion, while exports of fruits and vegetables declined 12% to $849 million.
Although Vietnam has raised concerns by pursuing its trade relationship with Russia following its invasion of Ukraine, it actually has strong ties with both countries. Exports to Russia in the first quarter declined 29.1% to $543.8 million, while imports increased 36.3% to $703.7 million. Meanwhile, exports to Ukraine declined 42.5% to $45.3 million, while imports from Ukraine increased 122.6% to $104.9 million.